Accounting Seminar: Neale O'Connor
Associate Professor Neale O'Connor currently works at Hong Kong Baptist University teaching Management Planning and Control Systems as well as International Accounting. For more details on speaker please see his Linkedin Profile.
The management of global business to business (B2B) supply chains is fraught with problems of trust and hidden costs that stem from geographical and cultural distances (location-specific complexity) between the partners. While prior research has found that firms have difficulty in estimating the costs of managing such relationships, their results are equivocal regarding how much control should be exerted over their geographical and/or culturally distant partners. In this study, we use interview survey data on 971 arms-length B2B relationships with Chinese suppliers to investigate how dimensions of location-specific complexity influence the use of formal control mechanisms by the buyer in managing their suppliers. Results of our regression analysis demonstrate that that international buyers use more selection routines and IT integration to control their suppliers, compared with domestic buyers, supporting the transaction cost economics (TCE) predictions. However, the variation in location-specific complexity among international buyers is not significant to any of the formal control mechanisms used. Furthermore, the relationship between location-specific complexity and the use of formal control mechanisms is strengthened by the importance of supplier’s resources to the buyer, and by the risk of reputational spillover from the supplier to the buyer, supporting the resource-based view. Our results suggest that resource-based view complements TCE in explaining interfirm controls in the global supply chain.